The Real Estate Bill, 2015

The Real Estate (Regulation and Development) Bill, 2015

The Rajya Sabha passed the Real Estate (Regulation and Development) Bill on March 10, 2016 that empowers homebuyers in making an informed choice about buying homes, ensures timely delivery, and provides swift options for legal recourse in case a developer fails to deliver on his promises.

The Real Estate (Regulation and Development) Bill, 2015 is expected to ease homebuyers' concerns including delayed delivery and change in project layout among others. Builders are also expected to benefit as higher transparency and accountability will improve institutional fund flow into the sector.

Bringing cheer to homebuyers, the bill has now paved way for setting up of sector regulator that is expected to offer them protection from unscrupulous activities. It has widened its scope by going beyond the recommendations made by select committee in December.

The bill bars developers from advertising and selling homes in projects till they have obtained all approvals from local authorities and they are registered with the regulatory authorities that will be set up in every state, alongside appellate tribunals for dispute resolution. Even ongoing projects, over 17,000 of them, will have to register with the authority.

At the time of the registration, the developer will have to disclose all project information including details of promoter, project plans, including implementation schedule, land status, layout plan, status of approvals, agreements, details of real estate agents, among many others, empowering buyers.

It also mandates that builders deposit 70% of money collected from buyers into a separate escrow account that will be utilized only for construction and payment for land, ensuring that money collected is not diverted to other projects or uses as has been the case with many builders in the past.

To bring in more projects under the ambit of the regulator, the bill says all projects on land more than 500 sq. mtrs. or eight apartments will have register with the regulator.

So far most developers measured and sold homes based on a term called super area, which is conventionally at least 30% more than the carpet area that a buyer can use. Now the term carpet area has been clearly defined to eliminate any scope for malpractices in transactions.

The bill brings parity on that front saying both consumers and developers will now have to pay same interest rate for any delays on their part. The builder buyer contracts so far have been grossly one-sided in many cases, asking buyers to pay much higher rate of interest for any delays on their part but allowed the builder to pay a very small amount.

The amended bill has also increased the liability of developers for structural defects from a period of two years to five and project plans can only be changed with consent from at least two thirds of the allottees.

One clause that would help both buyers and builders is insurance of land title, which is currently not available in the market.

Specific and reduced time frames have been prescribed for disposal of complaints by the Appellate Tribunals and Regulatory Authorities. While regulatory authorities will have to dispose complaintswithin 60 days, tribunals too will have to adjudicate casesin 60 daysas opposed to 90 days in the earlier form of the bill.

There is also a provision for imprisonment of up to 3 years for developers and up to one year in case of real estate agents and consumers as well for any violation of orders of tribunals and regulatory authorities.

And apart from just real estate projects, even commercial real estate projects have been brought under the ambit of the bill.

The Real Estate (Regulation and Development) Act will go a long way in bringing transparency into an industry plagued by a credibility crisis while ushering in more financial discipline among developers.

Industry watchers are hopeful that the law will help instrument a revival of the real estate sector in NCR, particularly Gurgaon, Noida, Greater Noida and Ghaziabad, which has been going through a prolonged slump. The main reason for the slowdown, consultants say, is the loss of credibility among developers in the eyes of buyers due to huge delays in completion of projects, in some cases by more than 10 years.

Besides, developers hardly pay any penalty to customers. Therefore, buyers land up paying EMI on loans taken to purchase the apartment and the rent for their homes. This has turned away potential buyers from the market and abetted the slowdown. But with the real estate industry now governed by a law, homebuyers can bank on legal safeguards on their investments. Under the Act, builders can be punished with imprisonment up to three years for violations. The Act also has a provision of stiff penalties for project delays that stipulates that builders should pay the same interest to customers that they charge them in case of a default in payment.

The RERA, as the Act is known, brings existing projects within its ambit. But since real estate is a state subject, the Act leaves it to state governments to announce guidelines on completion schedules of houses. A state government has to appoint a regulator, which will frame rules to govern the real estate sector.

Things You Must Know About This Bill.

The highly-awaited real estate regulatory bill has now been passed by the Rajya Sabha. The real estate (regulation and development) bill, 2016 seeks to protect the interests of aspiring house buyers. The bill further looks at enhancing the credibility of construction industry by promoting transparency, accountability and efficiency in the execution of projects. As the bill further makes strides towards becoming a law, here are the top 10 things you should know about it.

Escrow account
The centre has gone beyond the recommendation of the select committee and now requiring developers to deposit 70% of the collections form buyers in a separate accounts towards the cost of construction including that of land as against a minimum of 50% suggested by the select committee.

Area for project registration
Norms for registration of projects has been brought down to plot area of 500 sq.mtr. or 8 apartments as against 4,000 sq.mtr. proposed in the draft bill in 2013 and 1,000 sq.mtr. or 12 apartments suggested by the standing committee.

Commercial projects registration mandatory
Commercial real estate also brought under the ambit of the bill and projects under construction are also required to be registered with the regulatory authority. About 17,000 projects are reported to be at various stages of development.

Defined carpet area
Capret area has been clearly defined which forms the basis for purchase of houses, eliminating any scope for any malpractices in transactions.

Interest payable on project delays
Ending the earlier asymmetry, which was in favour of developers, both consumers and developers will now have to pay same interest rate for any delays on their part.

Structural defects timeline increased
Liability of developers for structural defects have been increased from 2 to 5 years and they can't change plans without the consent of two thirds of allottees.

Insurance of land titles
The bill provides for arranging insurance of land title, currently not available in the market which benefits both the consumers and developers if land titles are later found to be defective.

Timely dispute redressal
Specific and reduced time frames have been prescribed for disposal of complaints by the appellate tribunals and regulatory authorities.

Regulatory violation
A provision is now made for imprisonment of up to 3 years for developers and up to one year in case of real estate agents and consumers for any violation of tribunals and regulatory authorities.

Project blueprint to be submitted to the authorities concerned
The bill requires project promoters to register their projects with the regulatory authorities disclosing project information including details of promoter, project including schedule of implementation, lay out plan, land status, status of approvals, agreements along with details of real estate agents, contractors, architects, structural engineers etc.

Source : The Economic Times , The Hindustan Times & The Times of India. Posted by JasCon.- Making Real Estate Easy